David Brooks Is Being Ignorant on the Economy Again

Tuesday, 06 September 2011 04:03

David Brooks told readers today that there are no jobs in the green economy. While many political figures may have oversold the prospect for green jobs, the case that Brooks musters is much less clear than he suggests. For example, he tells us that:

"California was awarded $186 million in federal stimulus money to weatherize homes. So far, the program has created the equivalent of only 538 full-time jobs."

While that may sound like a pretty bad spending to jobs ratio, if we go to the article that Brooks references, we see that the main problem is that only a bit more than half of the money has been spent. If we say that $100 million has been spent to get us 238 jobs, that translates into $186,000 a job. That's not great, but if we had the same ratio for the whole stimulus (counting the AMT) then it would translate into 4.2 million jobs. Given that this money comes at essentially zero cost right now (the real interest rate on government debt is negative), this doesn't seem like too bad a way to reduce greenhouse gas emissions.

He then tells us that:

"executives at Johnson Controls turned $300 million in green technology grants into 150 jobs — that’s $2 million per job."

Okay, this is big-time sloppy. Most of the jobs created when people buy a GM car are not at General Motors. Most of the jobs created when people buy an iPad are not at Apple. If Brooks wants to find out how many jobs were created by this $300 million in green technology grants he will have to go beyond the executives at Johnson Controls and talk to suppliers. Who knows what this will uncover (they may all be in China), but the fact that Johnson Controls did not create many jobs really doesn't tell us anything.

However, the best story in Brooks' arsenal is his complaint about the Smart Grids Initiative. Based on a story from the Washington Post, he tells us that:

"the Smart Grid, while efficient and environmentally beneficial, will be a net job destroyer. For example, 28,000 meter-reading jobs will be replaced by the Smart Grid’s automatic transmitters."

If we turn to the piece, we see that the Smart Grid is creating jobs now, as workers are hired to install it. However, a few years down the road it will be a jobs destroyer, exactly as Brooks says, since workers will no longer be needed to read meters.

Okay, what's the problem? Right now we have an excess supply of labor. We need things for people to do to give them jobs. Installing the Smart Grid does that. However, we expect to be back at full employment at some point in the future. At that point, we will value efficiency. If we don't have to send tens of thousands of people around to read meters then they will be available to do other productive work. (Remember the retirement of the baby boomers and the shortage of workers this creates? Efficiency is a good thing.)

Being serious about this story, green jobs were in a fact a relatively small part of the stimulus. Recovery.gov shows $9 billion going to the main environmental program. There was also roughly the same amount used for energy-related tax incentives. If we say that a total of $20 billion went to green projects either through direct spending or tax incentives and we assume an average of cost of $200,000 per job, then we should expect to see 100,000 green jobs.

It's not easy to determine whether we got these jobs or not. These are construction workers who are installing energy efficient windows, the workers in the factories that produce not just the windows, but the materials that go into the windows, the truck drivers who transport the material and the windows, and the sales clerks who take the orders and do the billing at every company involved in the process.

It is also important to remember that we are in a downturn where the economy is operating below full employment. That means that we are wasting resources by not spending money. Money that is spent inefficiently, but puts people to work, is better than just leaving workers idle. If there are more efficient ways to spend the money, then that is even better, but Brooks didn't give us his list.

Green jobs will not be a panacea that will fix an otherwise sick economy. If we want manufacturing jobs (green or otherwise) then we have to bring down the over-valued dollar. If we allow a parasitic financial sector to persist then it will be a drain on the economy no matter how green it is. But there is no reason to think that energy-saving industries will be any less effective in generating employment rather than energy-using industries.